Plaintiffs, three Illinois nursing home facilities, sought a writ of mandamus against defendant, Jeffrey C. Miller, Director of the Illinois Department of Public Aid (IDPA), directing him to reimburse plaintiffs for Medicaid services in accordance with the inflation update procedure set forth in the Illinois State Medicaid plan which was in effect prior to January 1, 1980, rather than the procedure adopted in a rule amending the plan, which was effective January 1, 1980. On cross-motions for summary judgment the court found that the amendment was invalid and ordered that, beginning with services rendered on February 15, 1980, defendant update plaintiffs' operating costs for inflation by using the method contained in the State plan in effect prior to January 1, 1980. Defendant appeals. Plaintiffs cross-appeal that portion of the order which provides that their requested method of reimbursement begin with services rendered on February 15, 1980. We affirm in part, modify in part and remand.

The State of Illinois provides nursing home care for needy individuals through Medicaid, which is a cooperative State-Federal, partially federally reimbursed program authorized under the Social Security Act (see 42 U.S.C. § 1396 et seq.). The program is implemented in accordance with Federal regulations (42 C.F.R. sec. 430 et seq. (1979)) and administered by IDPA. To participate in the Medicaid program, Illinois must have a State plan, approved by the Department of Health and Human Services (HHS) (42 U.S.C. § 1396), which provides, inter alia, "for payment of the skilled nursing facility and intermediate care facility services provided under the plan on a reasonable cost related basis, as determined in accordance with methods and standards which shall be developed by the State on the basis of cost-finding methods approved and verified by the Secretary [of HHS] * * *." (42 U.S.C. § 1396a(a)(13)(E).) *fn1 In determining rates of reimbursement, IDPA must reasonably take into account economic trends such as inflation. (See 42 C.F.R. sec. 447.303 (1979).) Thus, Illinois nursing home facilities such as plaintiffs submit to IDPA annual cost reports which detail their expenses for the fiscal year preceding the calendar rate year. (See 42 C.F.R. sec. 477.274 (1979).) On the basis of these cost reports, IDPA calculates reimbursable costs and inflation updates of those costs. Prior to January 1, 1980, IDPA calculated the inflation update by comparing the two most recent cost reports of all nursing homes with the Consumer Price Index experience over the same period, and multiplying that factor by the projected price changes for the upcoming year.

On December 14, 1979, IDPA sent plaintiffs and other nursing home facilities copies of changes to the State Medicaid plan which included an amended procedure for calculating the inflation update factor whereby all available cost reports rather than the two most recent cost reports would be compared. From December 17 through December 24, IDPA published notice of the amended inflation update procedure in the newspaper of widest circulation in each Illinois city with a population of 50,000 or more. The notice did not provide for comments. The notice was not published in the Illinois Register because it was refused by that publication. On May 14, 1980, HHS approved the amendment retroactive to January 1, 1980.

On February 14, 1980, plaintiffs received their first payments computed in accordance with the amended inflation update procedure, and on February 15, 1980, plaintiffs demanded that IDPA pay them in accordance with the preamended method. After IDPA refused plaintiffs' demand, plaintiffs filed their complaint for mandamus. The court found that the amended inflation update procedure was invalid (1) because it is a rule within the meaning of the Illinois Administrative Procedure Act (IAPA) (Ill. Rev. Stat. 1979, ch. 127, par. 1001 et seq.), but was not published as required by that Act and (2) because it was not published as required by Federal regulations (42 C.F.R. sec. 447.205 (1979)). The court then ordered defendant to "update Plaintiffs' operating costs for inflation by using the method contained in the State plan in effect prior to January 1, 1980 commencing with services rendered on February 15, 1980, the date of Plaintiffs' demand on defendant to do so."

On appeal defendant argues that IAPA rulemaking procedures do not apply to the amendment of the State Medicaid plan, that he has not failed to comply with Federal notice and comment regulations, and that plaintiffs have not established the prerequisites for the issuance of a writ of mandamus.

• 1 The IAPA establishes notice and comment procedures for the adoption of agency rules. (Ill. Rev. Stat. 1979, ch. 127, pars. 1005 through 1005.03.) Defendant first contends that the notice and comment procedures are inapplicable here because the amended inflation update procedure, which constituted an amendment to the State Medicaid plan, is not a rule within the meaning of the IAPA. We note that although defendant frequently phrases his arguments in terms of the "state plan," it is only a rule amending the plan which is at issue here. Specifically, defendant asserts that the State Medicaid plan is a contract between the State and the Federal government which is without legal effect until it is approved by HHS. Defendant argues that since administrative rules have the force and effect of law, agency statements are not rules if their legal effect is contingent upon approval by a Federal agency. Thus, defendant maintains that "the lack of autonomy of the State Plan robs it of the essential ingredients of a rule." We believe that defendant's argument is not tenable.

Under the IAPA, a rule is defined as follows:

"`Rule' means each agency statement of general applicability that implements, applies, interprets, or prescribes law or policy, but does not include (a) statements concerning only the internal management of an agency and not affecting private rights or procedures available to persons or entities outside the agency, (b) informal advisory rulings issued pursuant to Section 9, (c) intra-agency memoranda or (d) the prescription of standardized forms." (Ill. Rev. Stat. 1979, ch. 127, par. 1003.09.)

The definition of a rule is very broad and it has only four specific, narrowly defined exclusions. In addition, we must construe the term liberally in order to effectuate the purposes underlying administrative procedure acts, one of which is to increase the opportunity for members of the public to have input into the formulation of agency policies which affect them. See Bonfield, The Iowa Administrative Procedure Act: Background, Construction, Applicability, Public Access to Agency Law, The Rulemaking Process, 60 Iowa L. Rev. 731, 828 (1975); see also Burns, Judicial Enforcement of the Illinois Administrative Procedure Act's Rulemaking Provisions, 55 Chi.-Kent L. Rev. 383, 391 (1979).

Plainly, the amended inflation update procedure is an agency statement of general applicability that implements policy. Looking at the IAPA definition of a rule and its exclusions, it is obvious that the emphasis is on general applicability, not on an agency's autonomy in adopting a rule. None of the exclusions even suggests that a Federal approval requirement would have any effect on the characterization of an agency statement as a rule. Thus, we will not read an autonomy requirement into the definition for a rule.

We believe that defendant's reliance on Wolston v. District of Columbia Department of Human Resources Social Services Administration (D.C. App. 1972), 291 A.2d 85, is misplaced. In Wolston, a food stamp recipient challenged an increase in the cost of his food stamp allotment on the ground that the increase was based upon rules and regulations which had not been promulgated and published as required by the District of Columbia Administrative Procedure Act. The Wolston court concluded that food stamp eligibility was controlled by the regulations of the Secretary of the United States Department of Agriculture as implemented by its Food and Nutrition Service, not by District of Columbia regulations, and that the Federal regulations were not rules which the District of Columbia was required to publish. 291 A.2d 85, 87.

• 2 The reimbursement of nursing home facilities under Medicaid does not involve the amount of Federal control found in Wolston. The statute in effect at the time IDPA amended the inflation update procedure required a State plan which provided for payment "in accordance with methods and standards which shall be developed by the State on the basis of cost-finding methods approved and verified by the Secretary [of HHS] * * *." (Emphasis added.) (42 U.S.C. § 1396a(a)(13)(E).) The current statute increases State control by eliminating this approval requirement. (See footnote 1.) Thus, HHS does not provide a fixed basis for the reimbursement of nursing home facilities. Rather, the States, with Federal guidance, set reimbursement rates. Moreover, even if this case involved the amount of Federal control found in Wolston, we believe that under the IAPA, Federal control would not be dispositive of the question of whether the amended inflation update procedure is a rule, but rather, would go to the question of whether general or peremptory rulemaking procedures are required. (See Ill. Rev. Stat. 1979, ch. 127, pars. 1005.01, 1005.03.) We conclude that the amended inflation update procedure is a rule within the meaning of the IAPA.

Defendant next argues that if the amended inflation update procedure is a rule within the meaning of the IAPA, it comes under either the public contracts or the agency management exception to which the notice and comment procedures of the IAPA do not ...

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